22nd December, 2015 · Feature

Takata future up in the air

2 minutes to read

The future of troubled airbag manufacturer Takata is in doubt after Honda, Toyota and Nissan dropped the Japanese company as a supplier.
Defective inflater and propellant devices meant Takata had to issue a recall affecting tens of millions of cars all over the world. It is the biggest safety recall in automotive history.

The three auto giants announced they were abandoning Takata in early November, with other Japanese manufacturers including Mazda, Mitsubishi and Fuji Heavy Industries (the maker of Subaru) also considering phasing out their use of Takata airbags.

American regulators have ordered Takata to phase out ammonium nitrate as a propellant in its inflaters unless it can prove it is safe. Ammonium nitrate can destabilise and even cause the device to explode, blasting metal fragments into the cabin like shrapnel. Eight people have died and more than 100 have been injured in such malfunctions.
The National Highway Safety Administration also fined Takata a record $US70 million ($A99 million), compounding the losses incurred by the recall of millions of vehicles. A further $US130 million ($A184 million) fine hangs over its head should it fail to meet its commitments.

The company reported a loss last financial year of 29.5 billion yen, which equates to around $A340 million. Its share price has dropped 40 per cent since Honda announced it was dropping it as supplier.

Despite the massive hit the company is expected to survive, depending on how quickly it can find a new propellant. Airbags constitute about 40 per cent of Takata’s sales, but sales of products such as seatbelts should provide enough of a cushion.

Another concern for Takata is the potential lawsuits it faces on top of the cost of servicing the recall, changing its propellant and the loss of custom. The company has set aside 68 billion yen ($A780 million) to fund the recall, but still expects to make a profit this year, albeit a quarter of its original forecast of 20 billion yen ($A230 million).

The defect has caused the recall of more than 30 million vehicles in the US alone, with millions more worldwide from more than 20 brands.